Germany's Network Agency Bundesnetzagentur regulator has suspended the ongoing certification of Russia's Nord Stream 2 gas export pipeline until the eponymous pipeline operator transfers ownership of subsea section and supporting infrastructure to its German affiliate.
The sudden announcement gave a new lift to gas spot prices on European trading hubs, as Russian authorities have repeatedly hinted that the increase of Russian gas flows to Europe will become possible only when Nord Stream 2 becomes operational.
The certification is the sole key condition still to be met for the recently concluded Nord Stream 2 to start pumping gas across the Baltic Sea to Germany.
Bundesnetzagentur said in its statement that the application to be certified as an independent transmission operator had been submitted by a Germany-incorporated subsidiary of Swiss-registered Nord Stream 2.
The agency found that this unnamed subsidiary only owns a short segment of the gas pipeline, located in the German maritime zone, and has virtually no staff.
Swiss-registered Nord Stream 2 controls the remaining segments of the twin-leg pipeline in Danish, Swedish, Finnish and Russian waters of the Baltic Sea.
Bundesnetzagentur said that it cannot proceed with the certification, as such arrangement contradicts requirements for independent transmission operators that are set in the German Energy Industry Act.
The agency said that the certification procedure will remain “suspended until Nord Stream 2’s main assets and human resources are transferred” to the subsidiary-applicant and Bundesnetzagentur is able to check whether the documentation, to be re-submitted by this subsidiary, is “complete”.
When these requirements are fulfilled, Bundesnetzagentur will resume its examination of the application in the remainder of the allocated four-month period, then produce a draft decision and deliver it to the European Commission for an opinion, it concluded.
Nord Stream 2 has defended its decision for its Germany subsidiary to file the application to the agency, saying in an e-mailed statement that the operator undertook “this step to ensure compliance with applicable rules and regulations”.
“We are not in the position to comment on details of the procedure, its possible duration and impacts on the timing of the start of the pipeline operations”, the operator said.
However, moving all Nord Stream 2 assets and staff into the German jurisdiction to comply with the request may turn a major predicament to the operator’s owner, Gazprom, because of higher taxation and corporate transparency requirements against its current domicile in Zug, Switzerland, according to suggestions in Moscow.
The operator is understood to have opted out of filling the second leg of the subsea gas pipeline with natural gas after Bundesnetzagentur had notified it on its decision before it was released in the public domain.
In October, Nord Stream 2 said that Gazprom pumped some 177 million cubic metres of gas into the first leg of the pipeline to reach a required working pressure.
Based on the current spot price in Europe, the value of gas that is now trapped in the first leg is estimated at $177 million.
Nord Stream 2 has faced opposition from the US, Poland, Baltic countries and Ukraine due to fears that it will make Europe too reliant on the Russian gas, widely believed to be used by the Kremlin to further its political goals.
Nations along legacy transit gas pipelines, Poland, Ukraine and Slovakia, also stand to lose transit revenues to the new system.
Poland's state oil and gas producer PGNiG has welcomed the suspension. "The German regulator agreed with our position that Nord Stream 2, as a company under Swiss law, can not serve as a transmission system operator," the president of the company's management board, Pawel Majewski, said in a statement.
PGNiG had earlier joined as an interested party to the certification process in Bundesnetzagentur as Poland witnessed declining transit flows of Russian gas across the country to Germany.
In November, the agency also permitted Ukraine's gas importer and distributor Naftohaz Ukrainy and the country's gas transmission authority, Operator GTS, to join the process.
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